Bank for International Settlements research says stablecoins could reinforce dollar dominance and create digital dollarisation risks for EMDEs

The Bank for International Settlements has published a BIS Papers study arguing that widespread stablecoin use could materially affect the international monetary and financial system, with the strongest effects likely in emerging market and developing economies. The paper finds stablecoins are most likely to affect private sector store of value and medium of exchange functions, especially where macroeconomic instability is already pushing users toward alternatives to domestic currency. Because about 98% of stablecoin value is denominated in US dollars, the authors argue their initial effect would most likely be to reinforce existing currency hierarchies rather than challenge them. The publication notes that the views expressed are those of the authors and do not necessarily reflect those of the BIS or its member central banks. The study develops three scenarios for future adoption. Under niche adoption, stablecoins remain largely confined to crypto markets and broader impacts stay limited. Under digital dollarisation, rapid take-up of dollar stablecoins in EMDEs could accelerate currency substitution, weaken monetary sovereignty, complicate capital flow management and create financial stability risks. Under domestic stablecoin integration, regulated local currency stablecoins could improve payment efficiency while preserving policy autonomy, but only where authorities have sufficient regulatory capacity. The paper also points to growing cross-border stablecoin use in higher-inflation and more volatile economies and says the eventual outcome will depend on adoption patterns, regulatory responses and competition from other forms of digital money.